The Hidden Costs of Third-Party Delivery Apps (and How to Avoid Them)

Over the past decade, third-party delivery apps like UberEats, GrubHub, and DoorDash have completely revolutionized the restaurant industry. With sleek apps and seamless ordering experiences, they've made getting food delivered as easy as tapping a few buttons on your smartphone.

For restaurants, partnering with these services seemed like a no-brainer - a way to exponentially increase their customer base, drive more revenues, and capitalize on the booming delivery market. However, the truth is that these apps come with staggering hidden costs that are eroding restaurants' profitability and jeopardizing their customer relationships.

At the core of the issue are the shockingly high fees and commissions that third-party apps charge restaurants for every single order:

• Delivery Fees: Most apps charge a delivery fee ranging from 15-30% of the total order value. For example, on a $100 order, up to $30 goes directly to the delivery app before the restaurant ever sees a penny.

• Marketing Commissions: In addition, many apps charge "marketing" or "promotions" commissions that can be 10-15% extra for premium placements and visibility boosts within the app.

• Credit Card Processing: The apps also rake in higher-than-average credit card processing fees of around 3-5% versus just 1-2% for typical merchant accounts.

And let's not forget the myriad other nickel-and-dime costs like smallware fees, contract termination fees, and the fine print that always seems to favor the app provider.

To put these excessive fees into perspective, let's use an example order of $100 at a restaurant:

• Delivery Fee (25%): $25
• Marketing Commission (12%): $12
• Credit Card Processing (4%): $4

Total Fees: $41

On a $100 order, the restaurant is already losing over 40% off the top, leaving them with $59 in revenue before factoring in their food costs, labor, rent and other operating expenses.

Now consider that the average profit margins for most restaurants hover between just 3-5%. After backing out the food delivery app's fees, what thin slivers are left can barely sustain operations, much less reinvest in growth.

According to David Burstein, CEO of Fintech.TV, "Far too many restaurants are bleeding cash trying to stay relevant on these third-party apps. The fees are simply unsustainable and restraining their ability to profit and grow."

But the corrosive impact of third-party apps extends far beyond just fees. By inserting themselves as the middleman, these apps are degrading restaurants' control over the end-to-end customer experience and relationship:

1. Loss of Customer Data: When an order comes through an app like DoorDash, the restaurant receives no visibility into the customer identity and can't directly market or communicate with that buyer moving forward.
2. Poor Delivery Experiences: Restaurants have zero control over the quality of the delivery personnel or service, yet their brand reputation is on the line. A recent U.S. Foods study found that 60% of customers blame the restaurant when third-party deliveries go awry.
3. Inconsistent Branding: From menu display to order packaging and more, third-party apps force restaurants to cede control of key branding and presentation elements.

According to management consultancy Pandata, a 2% increase in customer retention has the same effect as decreasing costs by 10%. So while third-party apps may seem to provide topline revenue growth, the hidden costs are customer relationships and long-term profitability.

Wilcu's all-in-one online ordering platform enables restaurants to avoid the excessive fees from third-party apps while retaining full control of their brand and customer relationships.

With Wilcu, restaurants simply pay a flat 5% fee on order revenues, with no other percentages, service charges or hidden costs. For that $100 order, you'd only pay $5 versus over $40 to a third-party app!

Wilcu seamlessly integrates with restaurants' POS systems, websites and digital channels to create a unified online ordering experience fully branded for their business. Restaurants can capture customer data, build loyalty programs, and directly market to their customer base - forging relationships that breed sustainable growth.

Ready to take back control of your profitability and customer relationships? Schedule a consultation with a Wilcu specialist today to learn more about our direct online ordering solution.

In an increasingly digitized world, restaurants can no longer afford to overpay third-party middlemen that are siphoning away their revenues, branding and customer relationships. With platforms like Wilcu, restaurants finally have a smart alternative to maximize profits and forge direct digital connections.